Milan, October 14, 2015 -- Moody's Investors Service has today placed under review with direction
uncertain the A3 long-term senior unsecured rating of SABMiller
Plc (SABMiller), the provisional (P)A3 rating of its medium-term
note programme (MTN) and the A3 senior unsecured ratings of its guaranteed
subsidiaries.
Moody's has also placed under review with direction uncertain the
P-2 short-term ratings of SABMiller and its guaranteed subsidiaries,
and the national scale ratings of Aa3.za/P-1.za assigned
to SABSA Holdings Limited. Finally, Moody's has placed
under review with direction uncertain the A3 issuer rating of Foster's
Group Pty Limited, the provisional (P)A3/(P)P-2 rating of
the medium-term note programme (MTN) and the senior unsecured A3
ratings of its guaranteed subsidiaries.
The review was prompted by the combined announcement on 13 October of
both Anheuser-Busch InBev SA/NV's (ABI, A2 under review for
downgrade) and SABMiller's boards that they had reached an agreement
in principle on ABI's intention to make an offer to acquire SABMiller's
entire share capital. The firm plans to offer GBP44.00 per
share, valuing SABMiller at around $106 billion and would
include a partial share swap for up to 41% of SABMiller's
shares. Following the announcement ABI's ratings were placed
under review for downgrade. Although the transaction structure
remains uncertain and subject to a number of conditions, the announcement
increases the likelihood that a deal will eventually be concluded.
The review reflects Moody's observation that if SABMiller were to
accept ABI's proposal, the financial leverage of the combined
group is likely to increase to levels not consistent with SABMiller's
current A3 rating, which could result in negative pressure on SABMiller's
rating. Moody's expects that any possible downgrade of SABMiller's
rating would not exceed two notches although any actual rating change
could be less material depending on the deal's final terms and structure
of the transaction. At the same time, however, the
direction uncertain recognises that today Moody's cannot exclude
that the review process might conclude with the rating of SABMiller being
upgraded by one notch (i.e. in line with the current ABI's
rating level), although Moody's sees this as a less likely
scenario.
Moody's notes, in any case, that no offer has been made
yet and that the final terms might still change. In addition,
a merger could face a number of hurdles, including the need to obtain
regulatory approval which could require the disposal of some assets.
This will have an impact on the final financial leverage of the combined
group. The proposed merger, if completed, would be
one of the largest corporate transactions globally.
RATINGS RATIONALE
The rating review is driven by the possibility that the combined entity's
financial leverage would no longer remain commensurate with an A3 rating.
Although the combined entity would have a superior business risk profile
and would become one of the largest consumer products companies globally,
the stronger business profile might not completely offset the higher financial
leverage.
SABMiller has extended until the 28 of October the deadline for ABI to
make a formal offer, from the previous deadline of the 14 of October.
The share swap will be for up to 41% of SABMiller's shares
and will be in the form of restricted shares, which will be unlisted
and with a five years lock-up period. ABI is expected to
finance the transaction through a combination of internal financial resources
and new third party debt. The final debt consideration will largely
depend on the acceptance rate of the share swap.
As part of the rating review Moody's will primarily focus on assessing:
1) the benefits which could result from combining the two groups,
in terms of business profile and potential for synergies; 2) the
strategy of the group going forward and its appetite for risk; 3)
expectations around the combined entity's financial leverage on
an ongoing basis, which will also depend on the acceptance rate
of the partial share swap proposed by ABI, and the company's
commitment to reduce it overtime; 4) the provision of guarantees
and whether there is a need to maintain separate ratings for the two entities.
We also note that some of SAB's bonds carry change of control language
which would trigger a put option if the final rating is lowered below
sub-investment grade, which we also deem unlikely at this
stage.
Absent of any transaction, SAB's ratings are likely to remain
unchanged unless the company adopted a more aggressive financial policy
to defend its current ownership structure.
RATIONALE FOR REVIEW OF SHORT-TERM RATING AND NATIONAL SCALE RATINGS
Although we see a confirmation of SABMiller's short term ratings
of P-2 and of its subsidiary national scale rating of Aa3.za
as the most likely scenario, the decision to also place these ratings
under review with direction uncertain is because we cannot exclude that
an upgrade of SABMiller's rating in line with that of ABI might
result in the short term rating and national scale rating being upgraded
as well.
RATIONALE FOR REVIEW OF FOSTER'S GROUP'S RATINGS
Foster's Group Pty Limited is a wholly owned subsidiary of SABMiller Plc
and its ratings move in line with those of its parent.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Alcoholic Beverage
Industry published in October 2013. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
SABMiller Plc is the world's second-largest brewer by volume,
and the third largest by revenues, producing and distributing a
large variety of beer brands in approximately 75 countries. During
FY ending March 2015 and including the share of joint ventures and associates,
the company generated total revenue (before excise duties and share of
associates and joint ventures) of US$22.1 billion (down
1% compared with the prior year).
ABI, incorporated in Leuven, Belgium, is the world's
largest brewing company. ABI has operations in 25 countries and
sells its products in over 130 countries, with market leading positions
in the United States, Brazil and Mexico, and a leadership
position in premium beer in China. The company reported over $45
billion in revenue for the twelve months year ended June, 2015.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Paolo Leschiutta
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Patrick Mispagel
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's places SABMiller's rating under review with direction uncertain
